How To YieldBoost Summit Hotel Properties To 14% Using Options
February 14, 2025 at 11:48 AM EST
Shareholders of Summit Hotel Properties Inc (INN) looking to boost their income beyond the stock's 4.9% annualized dividend yield can sell the September covered call at the $7.50 strike and collect the premium based on the 35 cents bid, which annualizes to an additional 9% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 14% annualized rate in the scenario where the stock is not called away. Any upside above $7.50 would be lost if the stock rises there and is called away, but INN shares would have to advance 15.2% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 20.6% return from this trading level, in addition to any dividends collected before the stock was called.
